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Home indemnity insurance

Unless your house is part of a multistorey development exceeding three storeys above ground and/or two or more basement levels, your builder is required by law to take out home indemnity insurance on your behalf.

The insurance policy should assist to ensure that your house can be finished in the event that your builder:

  • dies;
  • disappears; or
  • has gone out of business because he/she can't pay his/her debts (i.e. insolvent).

The insurance policy is required to be in place during construction and until six years from the date of "practical completion," that is, when the house can be reasonably used for its intended purpose.

Important points about home indemnity insurance

  • The cost of taking out home indemnity insurance should be included in the building contract.
  • The builder chooses the insurer from a list of approved insurers and takes out the policy on behalf of the homeowner. A list of approved insurers is available from Consumer Protection.
  • Under the minimum level of insurance cover required by law:
    • the maximum payout for loss of building deposit is currently $13 000; and
    • the maximum payout that can be made to rectify or complete a house under the insurance cover is currently $100 000 or the value of the contract work (whichever is less).
  • Your builder should provide you with a certificate of home indemnity insurance before starting any building work or taking any money from you under the building contract (including the deposit).
    • It is a good idea to keep the certificate of home indemnity insurance, so that you can give this to the new owner, should you sell the house before the six-year expiry date.
    • If you need to make a claim under the home indemnity insurance policy, you may be required to pay an excess.

You should consider taking out home and contents insurance when you take possession of your house in case of damage (unrelated to construction), fire, or theft.

More information

For more information about home indemnity insurance call Consumer Protection on 1300 30 40 54 and ask for a copy of our free brochure, Home Indemnity Insurance [PDF 67kb].